The companies also plan to set up a joint venture on consumer healthcare business.

According to GSK's announcement, GSK will acquire Novartis' global Vaccines business (excluding influenza vaccines) for an initial cash consideration of 5.25 billion U.S. dollars with subsequent potential milestone payments of up to 1.8 billion dollars and ongoing royalties, while the Swiss drug maker will acquire GSK's cancer drugs business for 16 billion dollars.

Both companies will also merge both of their consumer health divisions to create a 6.5 billion pounds (11 billion U.S. dollars) business. GSK has the bulk of the venture, with a 63.5 percent of the stake.

"Opportunities to build greater scale and combine high quality assets in vaccines and consumer healthcare are scarce," Andrew Witty, chief executive of GSK, said in a statement.

"With this transaction, we will substantially strengthen two of our core businesses and create significant new options to increase value for shareholders," he said.

Joseph Jimenez, chief executive of Novartis said in a statement:" The transactions mark a transformational moment for Novartis."

"They also improve our financial strength, and are expected to add to our growth rates and margins immediately," he added.